A blog exploring the intersection of economic thinking and urban planning/real estate development and related big-think themes.

Saturday, July 14, 2007

A contender

It's not the dumbest idea of all time but, as my friend would say, a contender. Today's LA Times reports "'Subway to the Sea' plan still adrift." The Mayor wants to extend LA's Red Line subway another 12.5 miles so it goes all the way to the beach. (Why stop there?)

Planners are still $5 billion short but, the story reports, they do have $5 million for a study of the project.

The sharing part of me prompts me to do the study for free. So here goes.

The present 16 miles of the Red Line accounts for an annual loss of $286 million (even after considering all manner of external benefits from some riders not driving). So we are looking at augmenting this problem by about $223 million per year. The $5 billion to be spent has an annual value (using the governments favored 7.5% annual interest rate) of $375 million. So the bottom line is: forget about it.

In fact, as a bonus, I suggest the MTA shuts down the 16 miles of Red Line they now operate. In fact, if each of the 115,000 current daily boardings are parts of a round-trip, there are approximately 57,500 of them. We could ask them if a lifetime pension of $5,000 per year would make them whole. It's mostly a low-income ridership that now uses the Red Line and many might think that this is pretty cool.

Or give each of the riders just $2,500 a year and refund the other half to the county's 3-million households. Each one could get about $50 each year -- and the promise that they will not have to cough up an additional $125 every year for the extension to the sea.

But I suppose that for me to be a contender for the $5-million study money, I would have to dig much deeper and do all kinds of sensitivity tests. For all that money, I might even find a way to justify this turkey.